The proposed £200 million flotation of Wagamama, the noodle bar chain, is in the balance this weekend amid growing indications of a lukewarm response from institutional investors and possible private equity interest.

It is understood that Lion Capital, which backed a £102.5 million buyout in 2005, has this week received two informal approaches from rival private equity firms. TDR Capital, the former owner of PizzaExpress, is rumoured to be interested.

Although investors in America are said to be keen to back an initial public offering (IPO), City sources said the feedback from UK institutions had been unenthusiastic. London-based institutions said that although Wagamama was a strong brand, the mooted £200 million valuation – or £225 million including debt – was high. “Shave £50 million off the price and we’d bite their hands off,” one said.

One of the problems for Wagamama is the share price fall in quoted restaurant stocks since July amid concerns that economic uncertainty could hit consumer spending. Sources suggested that Lion, which is being advised by Numis Securities, would prefer to postpone the IPO rather than cut the price. “This is not a distressed sale, so there is no pressure to sell on the cheap,” said one source. “This is a great business with the potential to be a truly global restaurant brand.”

Lion’s decision may have a knock-on effect on Gaucho Grill, which this month appointed Hawkpoint Partners, Altium Capital and Collins Stewart to handle a £100 million listing. Tragus Holdings has already delayed plans for a £500 million-plus IPO until early next year. The Café Rouge owner is tipped to appoint Goldman Sachs and Citigroup as advisers.

Wagamama, founded in 1991, has 51 outlets in the UK, 27 of them in London. Its international arm has two restaurants in America, which it owns and operates, plus 27 franchised units in eight other countries.

According to the prospectus, there is potential for 150 in the UK alone. It plans to open 12 in the year to the end of April, and 15 a year thereafter. It also expects to add five franchised outlets a year for the next few years.

In America, where it is has two eateries in the Boston area, it is still at the pilot stage. If the trial proves successful, it expects to start opening ten outlets a year in Washington, Philadelphia and New York.

Although Lion is planning to sell its entire 77.5 per cent stake, management, led by Ian Neill, chairman, and Steven Hill, chief executive, would reinvest part of their 22.5 per cent stake.

Last year the company lifted underlying earnings from £7.88 million to £10.49 million, and is tipped to make £17 million this year. In recent trading, like-for-like sales rose by 17 per cent.

None of the parties would comment.

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